THE ECONOMY: Australia must change to maintain its prosperity

by Gina Rinehart

News Weekly, November 12, 2011

Australia’s leading businesswoman, Gina Rinehart, has warned that Australia risks jeopardising its economic prosperity unless it reconsiders the mining and carbon taxes, and addresses constraints on the development of its mineral resources and northern development. This is an abridged version of her address to the Commonwealth Heads of Government (CHOGM) Business Summit in Perth.

In terms of the near-term outlook, Australia’s resource industry and its related industries are poised to continue to underpin our economic prosperity. From our nation’s perspective, West Australia has clearly been the leader in this regard.

On the one hand, recent strong commodity prices and increasing demand from overseas markets, particularly in Asia, have driven Australia’s terms of trade to record levels.

The economic rise of China and India has arguably been the greatest boom to Australia since iron ore was discovered in North West Australia in the mid-20th-century by my father, Lang Hancock. In the years since then, this has led to strong growth in trade links with our neighbouring countries, and last year more than half of Australia’s trade was conducted within the Asia Pacific region.

A bright future is not a foregone conclusion, and the advantages we currently enjoy are tempered by challenges that will test our capacity to deliver goods and services competitively. So let’s get down to it and look at this “other hand” because the other hand cannot be ignored if we wish a bright economic future for Australia, and if we wish West Australia to earn a position as a business hub in the 21st century.

As Hugh Morgan mentioned at the summit yesterday, one of the issues that need to be tackled is the cost, risk and time lost on approvals, permits and licences before revenue can be earned. These have very greatly increased in Australia, making it almost impossible for small companies to carry and comply with such burdens.

To open a new mine, build a railway and largely a new port, it takes 3,104 permits and approvals. It could be more; that’s what we have identified to date. Last year we said about 1,500 permits and approvals, but unfortunately we’ve found even more! This burden is simply too great for small and even medium companies and must be drastically reduced if we wish to be a business hub.

Further, any discussion on WA becoming a business hub of the 21st century can’t ignore the current Australian government’s introduction of a carbon tax, given Australia’s already very high costs by world standards.

The estimated cost of introducing the carbon tax varies in terms of jobs lost or not created. However, the prevailing view, confirmed by multiple analysts throughout Asia and Europe is that the carbon tax, and later the emissions trading scheme, will diminish Australia’s attractiveness to foreign investment and encourage companies to move investment and projects offshore — which is happening.

Another major challenge to attracting foreign investment is what analysts Ernst and Young, in a recent report, have labelled “resources nationalism” — or, in the Australian context, the minerals resource rent tax (MRRT).

This will have the flow-on effect of discouraging companies to invest in exploration for minerals, currently iron ore and coal.

Another further challenge facing Australia is the declining level of relative productivity. Australia’s productivity has been in decline for many years and has recently reached levels where the World Trade Organisation has warned Australia against complacency.

Adding to this is the reluctance of workers to travel to our hot and remote north to work, away from their families, friends and city conveniences. Shortage of labour has become a real risk for projects, especially those in our north.

Australia needs to open its doors to those wanting work on a short-term visiting-worker basis.

This would be a win-win-win — a win for visiting workers who have difficulty in supporting their families overseas; a win for Australia given that the assets and businesses are then able to be built in Australia and Australia can benefit from these for decades ahead; and a win for the companies which otherwise may think that the decision to invest in Australia is too risky and that they must invest offshore Australia instead.

What we should do initially is start long-term special economic zones in our north which would be welcoming to investment and with policies conducive to opening and developing successful businesses, to enable more opportunity for exciting vision and development, with low taxation for those Australians who want to work and live in our north.

Countries in Africa are telling the world and the world is listening: “We are open for business!” These African countries want investment, and businesses and jobs for their peoples. They encourage investment, which enables the creation of businesses and jobs and wealth for their people.

We need to realise the world is changing and won’t delay to suit Australia.